Can sustainable fashion deliver its promise?

We previously wrote about sustainable fashion in July 2022, and back then, my question was, \’do consumers really care about the environment\’? My bet was that sustainable consumerism did not reduce regular consumerism but topped it – and the same behavior occurred in terms of investment, meaning that sustainable choices are not made in the detriment of regular ones but jointly.

Some behavioral economic studies say that the joyous sensation of acquiring good products creates a backslash effect, unleashing mental permission to acquire a bad product (I italicize the terms because I am being overly simplistic with them – a discussion would lead to a huge essay, and that\’s not the goal). In day-to-day terms, it is the feeling you have after eating a salad that you are allowed (and deserve!) to indulge in gelato.

Would behavioral economics be correct, and after a boom of sustainable fashion investments and attention, the market has turned away from it – or at least, is it already indulging in fast fashion again? The partial answer is yes.

The chart below shows how much capital fashion companies have raised since 2019. A partially steady flow of capital increased until 2021 and decreased 10% from its peak between 2021 and 2022 – you will see below that, for sustainable fashion, the decrease was in a 70% order. There was a change, however, in the capital distribution: while M&As and corp represented the most significant chunk of investment, leaving PE, VC, and IPO far behind, recently, Private Equity became just are representative. Therefore, the industry is maturing.

On the other side, for sustainable fashion it seemed that the salad x gelato case indeed occur. 2022 investments were 70% lower than 2021 ones:

A relevant point is worth notice. While 13% of fashion companies went out of business, the same destiny occurred only to half of the sustainable fashion ones, in percentage. On the other hand, while 7% of invested fashion companies are profitable, sustainable fashion ones reached only 3% in this topic.

Next week, we\’ll dive into the profitable, sustainable fashion companies for our premium subscribers to understand what made them perform better than the others! If you still need to become a paid subscriber, I\’d like to invite you – this way, you are helping the blog reach even more people and contribute to our data and content quality, getting the best insights in the market.